The ultimate impact of new Canada-wide mortgage rules on the Calgary housing market is hard to predict. But experts say the new rules, combined with rising interest rates, might make it harder for many people to break into the market.
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Up in the air

A new Canada-wide stress test for people applying for uninsured mortgages is leading to uncertainty among experts about the possible effects on the Calgary real estate market in 2018.

The federal government’s new B-20 guidelines, introduced on Jan. 1, set out a new minimum qualifying rate or “stress test” for mortgages. Borrowers must qualify using the five-year benchmark rate published by the Bank of Canada, or the contractual mortgage rate plus two per cent – whichever is greater.

Greg Miller, a mortgage professional with Smart Cap Inc. in Calgary, says the impacts of a previous stress test introduced in 2016 for high-ratio mortgages are still unclear, so he feels the new rules are premature.

“I understand where the Bank of Canada was coming from,” said Miller. “I think it is a change that is fairly prudent. But a concern that I (have) and am hearing from a lot of other people is that they didn’t really wait long enough.

“The government says it wants to encourage homeownership, but they’re making it very difficult.”

Miller says a Canada-wide policy also can’t consider the different economic situations in a city like Calgary.

“The government says it wants to encourage homeownership, but they’re making it very difficult.” – Greg Miller, Smart Cap Inc. mortgage professional

“We’re still recovering here, whereas the rest of Canada is showing a real strong economy. So locally, these changes may have a different impact than they would in some other economies in Canada. And that’s one of the issues with policy implemented by the government: it’s a broad brush,” he said.

“I think it’s getting harder for people to get into the market.”

John Tarnowski, vice-president of retail financial services with ATB Financial, also says that forecasting the effect of the new rules on Calgary or any city’s real estate market is difficult.

“From an ATB standpoint, we’re not looking at this in terms of a particular demographic,” he said. “There are a few things you might end up seeing. You’re going to see some people that were considering refinancing (but) based on their qualifications, they may not qualify to borrow the same amount that they qualified for before this rule came into place – because of the current debt level they have.”

Tarnowski says the new rules may not result in people being moved completely out of the real estate market, but some buyers might need to save more for a down payment first, or “move down the curve” in terms of the type or price of real estate they plan to purchase.

He says a potential longer-term effect discussed by economists is a shift in the type of new homes being built, based on the size of mortgages that that people can qualify for now.

Adding to the uncertainty surrounding the new rules is the fact that after a period of seven years of declining or steady interest rates, they are starting to rise, which could slow the Calgary market.

“If the new regulations were being implemented in isolation, in the previous rate environment, I don’t know if it would have had an impact,” said Tarnowski.

“I think what changes now is B-20 being introduced in a rising rate environment, where now you have multiple factors.”